Court of Appeal (WA)|2016-06-27|Before: Mr P, Lure P, Newnes JA, Corboy J, Tottle J

MINERALOGY PTY LTD -v- SINO IRON PTY LTD [2016] WASCA 105 (27 June 2016)

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : MINERALOGY PTY LTD -v- SINO IRON PTY LTD [2016] WASCA 105

Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA

Citation : MINERALOGY PTY LTD -v- SINO IRON PTY LTD [No 8] [2015] WASC 473

Practice and procedure - Urgent application by appellant for interlocutory mandatory injunction - Injunction to require interim payments by respondent of royalty under long term contract - Respondents contended provision for royalty unenforceable - Primary judge dismissed application - No assessment made of strength of appellant's claim for royalty - Whether primary judge erred in failing to make assessment - Whether test to be applied on application for interlocutory mandatory injunction different to interlocutory prohibitory injunction

Application for interlocutory mandatory inunction remitted for hearing before different judge

First Respondent : Mr C M Scerri QC, Mr S H Parmenter & Ms T Spencer Bruce

Second Respondent : Mr C M Scerri QC, Mr S H Parmenter & Ms T Spencer Bruce

Third Respondent : Mr C M Scerri QC, Mr S H Parmenter & Ms T Spencer Bruce

Australian Broadcasting Corporation v O'Neill [2006] HCA 46; (2006) 227 CLR 57

Beecham Group Ltd v Bristol Laboratories Pty Ltd [1968] HCA 1; (1968) 118 CLR 618

Bingham v 7-Eleven Stores Pty Ltd [2003] QCA 402

Bradto Pty Ltd v State of Victoria [2006] VSCA 89

Businessworld Computers Pty Ltd v Australian Telecommunications Commission (1988) 82 ALR 499

F & G Sykes (Wessex) Ltd v Fine Fare Ltd (1967) 1 Lloyd's Rep 53

Films Rover International Ltd v Cannon Film Sales Ltd [1987] 1 WLR 670

Foley v Classique Coaches Ltd [1934] 2 KB 1

JTA Le Roux Pty Ltd (as trustee for the FLR Family Trust) v Lawson (No 2) [2013] WASC 373

Mineralogy Pty Ltd v Sino Iron Pty Ltd [2013] WASC 194

Mineralogy Pty Ltd v Sino Iron Pty Ltd [No 2] [2013] WASC 375

Mineralogy Pty Ltd v Sino Iron Pty Ltd [No 6] [2015] WASC 80

Mineralogy Pty Ltd v Sino Iron Pty Ltd [No 8] [2015] WASC 473

National Commercial Bank Jamaica Ltd v Olint Corporation Ltd [2009] UKPC 16

Ocean Dynamics Charter Pty Ltd v Hamilton Island Enterprises Ltd [2015] FCA 460

Optus Networks Pty Ltd v City of Boroondara [1997] 2 VR 318

Optus Networks Pty Ltd v Stonnington City Council [1996] VICSC 12; [1996] 2 VR 209

Queensland v Australian Telecommunications Commission (1985) 59 ALR 243

Racecourse Totalizators Pty Ltd v Totalisator Administration Board of Queensland [1995] FCA 1405; (1995) 58 FCR 119

Samsung Electronics Co Ltd v Apple Inc [2011] FCAFC 156; (2011) 217 FCR 238

Shepherd Homes Ltd v Sandham [1971] 1 Ch 340

Warner-Lambert Co LCC v Apotex Pty Ltd (ACN 096 916 148) [2014] FCAFC 59

1 McLURE P: This is an appeal from the decision of Tottle J dismissing the appellant's claim for an interlocutory mandatory injunction based on a contractual promise to pay a royalty. I agree with the orders proposed by Newnes JA. The factual background is detailed by Newnes JA. It is sufficient for present purposes to note the following.

2 The Mining Right/Site Lease Agreement (MRSLA) between the appellant (Mineralogy) and the first respondent (Sino Iron) and a relevantly identical MRSLA between Mineralogy and the second respondent (Korean Steel) were entered into on 21 March 2006 and are long-term contracts. Mineralogy claims the third respondent (CITIC) guaranteed the obligations of Sino Iron and Korean Steel under their respective MRSLA. CITIC is the ultimate holding company of Sino Iron and Korean Steel.

3 As the MRSLA's are in relevantly identical terms, what applies to Sino Iron also applies to Korean Steel. In consideration of Sino Iron's entitlement to explore for, mine and process (on facilities to be constructed by Sino Iron), magnetite ore on mining tenements in the Pilbara owned by Mineralogy, Sino Iron is obliged, by cl 8.2 of the MRSLA, to pay royalties to Mineralogy, being Royalty Component A (RCA) and Royalty Component B (RCB). RCA is calculated at 0.30 AUD per tonne of magnetite ore taken under the MRSLA, adjusted for movements in the consumer price index.

4 RCB, the formula for which is set out by Newnes JA, applies to magnetite ore that has been processed by Sino Iron into 'Products'. Under the MRSLA (cl 7.2), Sino Iron is obliged to process all magnetite ore into either iron ore concentrates, pellets or hot briquetted iron (HBI), all of which fall within the defined term 'Product' in the RCB formula. Pellets can be further processed into HBI (cl 7.6). The term 'iron ore concentrates' is defined to mean magnetite ore concentrated to at least 65% Fe. Sino Iron did not start to produce 'Product' until 2013.

5 Sino Iron is obliged to pay RCA and RCB (together referred to as the 'Mineralogy Royalty') quarterly based on the quantity of magnetite ore and Products produced during the previous quarter and is payable not later than the 14th day of the quarter (cl 8.1(c)). The scope of RCB was summarised by CITIC in its announcement to the Hong Kong Stock Exchange on 31 March 2006 as an additional royalty payable quarterly to Mineralogy by Sino Iron by reference to the market price of pellets and Mount Newman fines (as the reference for the price of concentrates) and is calculated as follows:

(i) production volume multiplied by 50% and multiplied by the prevailing published annual FOB price (expressed in US dollars per dry metric ton unit (DMTU)) for pellets established by the largest supplier or seller of pellets in Brazil for export and multiplied by 68.1 and multiplied by an applicable rate in the range of 6% to 10% depending on the then prevailing market price for pellets; plus

(ii) production volume multiplied by 50% and multiplied by the prevailing published annual FOB price (expressed in US dollars per DMTU) for Mount Newman fines for export and multiplied by 68.1 and further by 1.05 and multiplied by an applicable rate in the range of 6% to 10% depending on the then prevailing market price for concentrates.

6 If there is an FOB price for Brazil pellets or Mount Newman fines applying for different destinations, the applicable price for use in the RCB formula is the published price for shipment to China (if any), or to Asia (cl 8.3).

7 The primary claim of the CITIC parties is that the obligation in cl 8.2 of the MRSLA to pay RCB on the total aggregate tonnes of Product produced by Sino Iron is void for uncertainty and severable, with the consequence that the consideration moving to Mineralogy from Sino Iron is confined to RCA. The alternative, fall-back positions of the CITIC parties (in the following order) are that:

(1) there is an implied term in the MRSLA that the parties negotiate in good faith to agree an appropriate replacement formula for calculating RCB;

(2) there is an implied term in the MRSLA requiring the parties to negotiate in good faith to resolve the dispute relating to RCB before taking steps to have it determined by the court;

(3) on its proper construction, cl 8.2 requires Sino Iron and Korean Steel to pay a royalty that is fair and reasonable;

(4) the MRSLA's have been terminated by frustration.

8 The alleged source of the contractual uncertainty in the RCB formula is the expression 'the prevailing published annual FOB price' for Brazilian pellets for export and Mount Newman fines for export. At the time of entry into the MRSLA, there was a global iron ore pricing system in place, known as the Annual Benchmark Pricing System (ABPS). It had been in operation since the 1960s and was the annual contract price, in US dollars per DMTU, for a Japanese fiscal year commencing 1 April and ending 31 March. It is admitted by Mineralogy that the ABPS ceased to operate in around early 2010.

9 In its interlocutory injunction application, Mineralogy tendered two expert reports, one by Mr R Brierley, a mining engineer with significant experience in the iron ore and financial services industries. His evidence is that the ABPS came to an end after China surpassed Japan as the largest collective customer of iron ore and a significant spot market had evolved that resulted in the publication of daily prices. Mr Brierley said that in the relevant period, daily (spot) prices were published from which quarterly and annual FOB price in US dollars per DMTU for both Brazilian pellets for export and Mount Newman fines for export could be determined. He calculated the average spot prices for the relevant quarters, and the average annual spot prices, for pellets and Mount Newman fines (at 62% Fe) based on those published spot prices.

10 Relying on Mr Brierley's report and other specified assumptions, Mr S Sorbello, a chartered accountant, calculated that the RCB for the period from the fourth quarter of 2013 to the third quarter of 2014 was $21,424,686 and for the period from the fourth quarter of 2014 to the third quarter of 2015, was $26,658,261. The total aggregate tonnes of Product for the whole period is 4,734,380.

11 Under the MRSLA, Sino Iron was required to produce not less than 6 million tonnes of Product no later than seven years from 21 March 2006. If it failed to do so, it was required under cl 6.3 to pay to Mineralogy an amount equivalent to the royalty payable on 6 million tonnes of Product. In its 2006 report to the Hong Kong stock exchange, CITIC estimated that royalty to be approximately $US42 million, based on the 2005 market price. Thus, RCB was a very significant number even before the subsequent steep rises in the market price of iron ore.

12 Other relevant provisions of the MRSLA are as follows. All magnetite ore taken by Sino Iron under the MRSLA is owned by it (cl 7.1). Sino Iron is entitled to take a quantity of magnetite ore up to the annual extraction limit of 12 million tonnes (cl 3.2(d)).

13 Any failure to pay a Mineralogy Royalty by the due date attracts the default interest rate, being that equal to the lending rate for loans exceeding $100,000 to prime borrowers charged from time to time by Mineralogy's bankers (cl 30.1). However, any damages for breach or default under the MRSLA is confined to damages for direct loss and damage. Damages for indirect or consequential loss, including loss of profit, are excluded. The relevant default provision is cl 30.4(d) which provides:

In the event ... a default in Sino's obligations to pay Mineralogy the Mineralogy Royalty ... continues for a period of 21 days after written notice of such default requiring Sino to remedy the same, Mineralogy shall be entitled by notice in writing to Sino to require Sino to suspend all operations carried out by or on behalf of Sino upon the Project Area or payment is resumed. If such default has not been remedied after 90 days from the service of any notice pursuant to this clause, Mineralogy has the right on 21 days written notice to terminate this Agreement.

14 Under cl 8.6, any dispute as to the amount paid to Mineralogy shall be referred to an expert in accordance with cl 33, who shall make in the absence of agreement between the parties a final determination for any quarter of the amount to be paid to Mineralogy under cl 8. The MRSLA is governed by the law in force in Western Australia (cl 38.4). Clause 38.5 relates to severability and provides:

If it is held by any court of competent jurisdiction that:

(a) any part of this Agreement is void, voidable, illegal or unenforceable; or

(b) this Agreement would be void, voidable, illegal or unenforceable unless any part were severed from this Agreement,

that part will be severed and will not affect the continuing operation of the rest of this Agreement.

15 On the application of the CITIC parties, Mineralogy has been restrained, by interlocutory injunction granted on 14 October 2013, from exercising its rights under the MRSLAs. Mineralogy issued a default notice dated 26 July 2013 arising from the failure by Sino Iron and Korean Steel to pay RCB for specified quarters. Based on the CITIC parties' primary claim that the obligation to pay RCB was uncertain, void and severable, Edelman J granted an injunction restraining Mineralogy from relying on the defaults in the notice to issue a suspension notice, a termination notice or to terminate or purport to terminate the MRSLA's: Mineralogy Pty Ltd v Sino Iron Pty Ltd [No 2] [2013] WASC 375 (the first injunction). Mineralogy had adduced evidence of the published spot prices for Brazilian pellets and Mount Newman fines in the relevant period (a report by AME Consulting Pty Ltd and a briefing prepared by Platts). Edelman J refused to impose a condition requiring Sino Iron and Korean Steel to pay any part of the RCB claimed by Mineralogy. The terms and effect of the first injunction are highly unorthodox but there was no appeal. Mineralogy is prevented from issuing notices and taking steps under cl 30.4(d) of the MRSLA, which is its only contractual avenue to respond to the prima facie breach of the obligation to pay RCB for processed Product that became the property of Sino Iron and Korean Steel under the MRSLAs. The CITIC parties were protected from the risk of that prima facie breach of the MRSLAs, save for their exposure to the payment of interest at the default rate (in a low interest environment). Any incentive for the respondents to resolve the RCB dispute was removed. Further, Edelman J injuncted Mineralogy without making an assessment of the strength of Sino Iron's primary claim that the obligation to pay RCB is uncertain, void and severable. Although the amount of RCB in issue was small, the practical effect of the first injunction extended to Mineralogy's future entitlements to RCB.

16 Following the interlocutory injunction granted by Edelman J, Mineralogy issued a flurry of default and termination notices addressing a range of breaches other than Sino Iron's continuing refusal to pay any RCB. The CITIC parties then sought further interlocutory injunctions to the effect that Mineralogy be prevented from:

(i) issuing a suspension notice or a termination notice on the basis of the refusal by Sino Iron and Korean Steel to join in requesting nomination of an expert to deal with the issue concerning RCB;

(ii) examining books and records relevant to the calculation of RCB;

17 The application was heard by Chaney J in January 2015. I have been unable to locate the terms of the interlocutory injunction made by Chaney J. Tottle J states that Chaney J made orders restraining Mineralogy from suspending the operations or terminating the MRSLA [100]. I doubt that is correct. It appears the injunction granted by Chaney J prevented Mineralogy from taking any steps to retake possession of those parts of its mining tenements in the exclusive possession of Sino Iron and Korean Steel consequent upon the termination of the MRSLA without giving 60 days prior written notice to the other parties. However, Chaney J made it clear in his reasons (Mineralogy Pty Ltd v Sino Iron Pty Ltd [No 6] [2015] WASC 80 [42]) that because Sino Iron and Korean Steel would suffer very substantial losses from the temporary or permanent suspension of mining operations on Mineralogy's tenements that employ thousands of people, the balance of convenience would always favour Sino Iron and Korean Steel. That is, in effect, to wholly deprive Mineralogy of an important part of its contractual right in cl 30.4(d), a right negotiated between parties well able to allocate contractual risks with an understanding of the likely impacts.

18 Chaney J rejected Mineralogy's application for a condition that Sino Iron and Korean Steel pay the sum of $US22 million to Mineralogy in respect of RCB on account of the amount owed up to the end of December 2014. Mineralogy had relied on a report prepared by Mr Sorbello. Chaney J refused to impose such a condition on the ground that Mr Sorbello's opinion was based on assumptions not properly established by admissible evidence. Like Edelman J, Chaney J did not consider the strength of Sino Iron's primary claim that the obligation to pay RCB is uncertain, void and severable.

19 On 20 November 2015, Mineralogy filed an application for orders that the CITIC parties pay to it the sum of $48 million or such other sum as the court may determine (the payment order); that Sino Iron and Korean Steel be restrained from mining, processing, shipping or otherwise transporting iron ore or iron ore products under the MRSLAs unless and until they complied with the payment order; if the CITIC parties complied with the payment order, Sino Iron and Korean Steel be permitted to mine, process, ship or otherwise transport iron ore and iron ore products provided that Sino Iron and Korean Steel pay to Mineralogy a sum calculated by multiplying $US$6 by the number of DMTU of concentrate shipped in the preceding quarter; if they failed to pay the future amount, they be restrained from mining, processing, shipping or otherwise transporting iron ore or iron ore products.

20 Affidavits sworn on 25 November 2015 by Mr Brierley and Mr Sorbello were filed and served in support of Mineralogy's application. Mineralogy pressed for an urgent hearing and the court acceded to that request. One of the grounds for urgency, also relied on in the balance of convenience, was the precarious financial position of Mineralogy's associated company, Queensland Nickel Pty Ltd. As a result of the urgent hearing, the CITIC parties did not have an adequate opportunity to test or contradict Mineralogy's expert evidence.

21 The approach taken by Tottle J (the primary judge) to Mineralogy's application is consistent with that of Edelman J and Chaney J in the respondents' successful interlocutory injunction applications. Although satisfied that Mineralogy had established a serious question to be tried, the primary judge said he was not in a position to make any assessment of the strength of the claim to RCB, including and especially, any provisional assessment of quantum [74]. Accordingly, he dismissed Mineralogy's application.

22 The total effect of the decisions at first instance is that Sino Iron and Korean Steel have been permitted to receive all the contractual benefits to which they would be entitled under the MRSLAs whilst refusing to pay any amount on account of RCB and having the benefit of interlocutory injunctions preventing Mineralogy from exercising its contractual rights under cl 30.4(d) of the MRSLA.

23 I agree with Newnes JA that the primary judge erred in failing to make an assessment of the strength of the CITIC parties' primary defence that RCB is uncertain, void and severable. Courts go to very considerable lengths to uphold agreements and the terms thereof. Ambiguity does not mean (legal) uncertainty. Courts will always strive to give a businesslike or commercial meaning to contractual terms. This preparedness to uphold the validity of a contract or its terms is further heightened when, as in this case, the agreement is a long term contract which is partially performed.

24 There are separate aspects to the proper construction and application of the RCB in cl 8.2 of the MRSLA. The first is the identification of the relevant standard for determining the Brazilian pellet price (PP) and the Mount Newman fines concentrate price (CP) in the RCB formula. The ABPS provided the published market price of the relevant products for the relevant quarter. That is confirmed by CITIC in its 2006 announcement to the Hong Kong stock exchange. Prima facie, the standard for the calculation of RCB is the published market price for the relevant products (PP and CP) during the relevant quarter. The fact that (unlike the ABPS) the market price changes during the relevant period does not make the standard legally uncertain. How best to achieve and quantify the market price for the relevant period is a matter for expert evidence on a subject involving a well understood process that is neither ambiguous nor uncertain. Up to now, the CITIC parties have been successful without adducing expert evidence on this subject.

25 Alternatively, it is arguable that the agreement to refer disputes to an expert under cl 8(6) of the MRSLA extends to both the standard and the quantification of the RCB. See Foley v Classique Coaches Ltd [1934] 2 KB 1; F & G Sykes (Wessex) Ltd v Fine Fare Ltd (1967) 1 Lloyd's

Rep 53. Either way, the claim that RCB is uncertain, void and severable faces formidable obstacles.

26 However, Mineralogy's insistence on an urgent hearing means this court cannot itself determine the application without infringing the respondent's right to procedural fairness. The application should be remitted to Chaney J who is responsible for the management of the action.

27 NEWNES JA: This is an appeal from a decision of Tottle J who dismissed an application by the appellant (Mineralogy) for a mandatory injunction requiring the respondents to pay to the appellant an amount of $48 million by way of a royalty under agreements between the parties concerning what is known as the Sino Iron Project.

28 The proceedings have a long and, in some respects at least, far from admirable history. This is only the latest instalment in the interminable interlocutory disputes that have punctuated and delayed the progress of the proceedings to trial. That tortuous path has defied the best endeavours of successive case managers to impose some order and sense of urgency on parties whose commercial objectives do not always seem to include the expeditious resolution of the proceedings. Whilst much of the responsibility for the unruly nature of the proceedings lies with Mineralogy, regrettably in the end the progress of the proceedings does not cast either side in a good light.

29 Fortunately, for present purposes the relevant background can be stated relatively shortly. Mineralogy holds mining tenements and a general purpose lease over an area of land in the Pilbara region in the north of Western Australia. On 21 March 2006, it entered into agreements (MRSLAs) with each of the first respondent (Sino Iron) and the second respondent (Korean Steel) granting them a right to mine for magnetite ore (up to an extraction limit) and granting them a site lease for the construction and operation of their processing facilities. The two MRSLAs are in identical terms and for present purposes it is unnecessary to distinguish between them. The third respondent (CITIC) is the ultimate holding company of Sino Iron and Korean Steel.

30 Sino Iron and Korean Steel now operate the Sino Iron Project, a large scale magnetite ore mining project, on the land pursuant to the MRSLAs. The amount spent by those parties on it to date is apparently some $8.4 billion.

31 It is unnecessary to trace in detail the origins of the dispute between the parties that has given rise to the current litigation. Suffice it to say

that, on 18 March 2013, Mineralogy commenced proceedings in the New South Wales Supreme Court against Sino Iron and Korean Steel. Those proceedings were transferred to the general division of this court on 30 April 2013. CITIC was subsequently joined as a party to the action, Mineralogy contending that, by a deed made on 22 October 2008, CITIC had guaranteed the obligations of Sino Iron and Korean Steel under the MRSLAs.

32 A central issue in the proceedings is whether a royalty, described as 'Royalty Component B', is payable by Sino Iron and Korean Steel, and, if so, how the amount of that royalty is to be calculated.

33 The MRSLAs include provisions that require Sino Iron and Korean Steel to pay royalties to Mineralogy in certain circumstances, those circumstances having since come about. In particular, cl 8 of the MRSLAs provides for the payment to Mineralogy of the 'Mineralogy Royalty'. The Mineralogy Royalty has two components, 'Royalty Component A' and 'Royalty Component B'. Neither component has been without its difficulties. A dispute in relation to Royalty Component A was determined by Edelman J in Mineralogy Pty Ltd v Sino Iron Pty Ltd [2013] WASC 194, and that component of the royalty is not the subject of the current proceedings.

34 To explain how the dispute over Royalty Component B arises it is necessary to set out cl 8.1 to cl 8.6 of the MRSLAs. They are as follows:

(a) Sino [Korean] will pay to Mineralogy a royalty ("Mineralogy Royalty") in respect of Magnetite Ore taken by Sino [Korean] pursuant to the exercise of its Mining Right.

(b) The Mineralogy Royalty is an enduring royalty, payable throughout the Term of the Mining Right.

(c) Sino [Korean] will pay the Mineralogy Royalty quarterly, based on the quantity of Magnetite Ore taken by Sino [Korean] and Products produced during the previous quarter. The Mineralogy Royalty will be payable not later than the 14th day of each quarter.

(a) The Mineralogy Royalty is calculated according to the following formula:

Mineralogy Royalty = Royalty Component A + Royalty Component B

Royalty Component A at the date of this Agreement is as specified in Item 5 of the Schedule; and

Royalty Component B is calculated according to the following formula:

Royalty Component B = (PR x ((1/2 x Product) x PP))

Royalty Component B = The amount of the additional royalty payable for that quarter.

Product = The total aggregate tonnes of product (derived from iron ore) produced by the Sino [Korean] in that quarter for sale or supply, regardless of the type of that product.

PP = The prevailing published annual FOB price (expressed in US dollars per DMTU [the percentage by mass of iron in a tonne determined on a dry basis]) for pellets established by the largest supplier or seller of pellets in Brazil for export multiplied by 68.1.

CP = The prevailing published annual FOB price (expressed in US dollars per DMTU) for Mount Newman fines for export multiplied by 68.1 and then further multiplied by 1.05.

(a) less than US$55 - 6% of the Pellet Price;

(b) greater than or equal to US$55 but less than US$65 - 8% of the Pellet Price;

(c) greater than or equal to US$65 but less than US$70 - 9% of the Pellet Price; or

(d) US$70 or greater - 10% of the Pellet Price.

CR = Where the Concentrate Price is:

(a) less than US$35 - 6% of the Concentrate Price;

(b) greater than or equal to US$35 but less than US$40 - 8% of the Concentrate Price;

(c) greater than or equal to US$40 but less than US$45 - 9% of the Concentrate Price; or

(d) US$45 or greater - 10% of the Concentrate Price.

(b) The rate of Royalty Component A will be reviewed on a quarterly basis from the date of this Agreement. On each review, the increase in the rate of the Royalty Component A will be a percentage equal to the CPI Movement between the date of review and the date of the previous review (or the date of this Agreement in the case of the first review).

If there is a FOB price for either Brazil pellets or Mount Newman fines applying for different destinations, the applicable price for use in the formula in calculating Royalty Component B under clause 8.2(a) will be the price for shipments to China, or, if there is no price for shipments to China, for shipments to Asia.

Each payment of Mineralogy Royalty will be accompanied by a statement, showing in detail the calculation of the Mineralogy Royalty for the month in question. The statement will include such information as Mineralogy may reasonably require for the purpose of confirming the correctness of the calculation.

(a) Mineralogy may at any time on reasonable written notice to Sino [Korean] inspect and copy Sino's [Korean's] books and records for the purpose of verifying the amount of Mineralogy Royalty payable by Sino [Korean].

(b) In exercising its right under clause 8.5(a), Mineralogy agrees to give to Sino [Korean] a minimum of 7 days written notice.

(c) Mineralogy may also, at its cost, have Sino's [Korean's] books and records audited. Sino [Korean] will make freely available its books and records for this purpose to Mineralogy or its auditors.

Any dispute as to the amount paid to Mineralogy shall be referred to an Expert, in accordance with clause 33, who shall make in the absence of agreement between the parties a final determination for any quarter of the amount to be paid to Mineralogy under this clause 8.

35 It can be seen that the calculation of Royalty Component B has two parts. A component of the first part (PP) is the 'prevailing published annual FOB price (expressed in US dollars per DMTU [the percentage mass of iron in a tonne determined on a dry basis]) for pellets established by the largest supplier or sellers of pellets in Brazil for export multiplied by 68.1.' That is, it depends upon a prevailing published Brazilian price for pellets.

36 The other component (CP) is the 'prevailing published annual FOB price (expressed in US dollars per DMTU) for Mount Newman fines for export multiplied by 68.1 and then further multiplied by 1.05.' That depends upon a prevailing published Mount Newman price for fines.

37 The respondents say that on the proper construction of cl 8.2, the reference to those prevailing published prices is a reference to the Annual Benchmark Pricing System. It is common ground that the Annual Benchmark Pricing System was the global iron ore pricing system in place from about the late 1960s through to about early 2010. Under this system, annual benchmark prices for iron ore products were set through negotiations between the world's largest steelmakers and their largest suppliers, before being announced by the suppliers and published.

38 It is not in issue that the Annual Benchmark Pricing System ceased to operate in around early 2010, after the MRSLAs were entered into but some three years prior to the extraction of ore and the production of Product which triggered the obligation to pay Royalty Component B. The respondents allege that Royalty Component B is therefore not capable of calculation in accordance with cl 8.2 of the MRSLAs and the MRSLAs make no provision for any other method of calculating it. The respondents say the consequence is that:

(a) the parts of cl 8.2 which relate to Royalty Component B are therefore 'uncertain, void and/or unenforceable' and are to be severed from the MRSLAs without affecting the continued operation of the rest of the MRSLAs; or

(b) alternatively, if those parts of cl 8.2 cannot be severed there is an implied term of the MRSLAs, in effect, that

(i) the parties must negotiate in good faith to seek to agree on an appropriate replacement formula to calculate Royalty Component B, or

(ii) that the parties must negotiate in good faith before taking any steps to have any dispute as to the calculation of Mineralogy Royalty determined by a court, or (iii) that the Mineralogy Royalty is one that is fair and reasonable; or

39 Needless to say, Mineralogy does not accept any of those contentions. It maintains that Royalty Component B remains capable of calculation. In the proceedings before the primary judge, Mineralogy contended that it is possible to calculate the prevailing published Brazilian and Mount Newman prices contemplated by cl 8.2 by reference to prices published by various sources identified by a mining engineer, Mr Brierley, in an expert report tendered in evidence on the application for the mandatory injunction.

40 The result of the dispute, however, is that whilst Sino Iron and Korean Steel have paid Royalty Component A to Mineralogy, they have not paid any amount in respect of Royalty Component B. It is not in contention that Sino Iron and Korean Steel have mined and processed ore and have shipped a substantial quantity of magnetite concentrate, in respect of which Royalty Component B would, if it is capable of calculation, be payable. Mineralogy alleges that the amount of Royalty Component B owing by Sino Iron and Korean Steel under the MRSLAs as at 30 September 2014 is an amount of some $22 million. I should add that Royalty Component B is far and away the greater proportion of the royalties payable by Sino Iron and Korean Steel under the MRSLAs.

41 Mineralogy further alleges that, in October 2014, it terminated the MRSLAs, following the repudiation of them by Sino Iron and Korean Steel, and that it is entitled, among other things, to damages for loss of bargain in an amount of $6.4 billion. It alleges in the alternative, that if (as Sino Iron and Korean Steel contend) the MRSLAs have not been validly terminated, a further amount of some $26 million is owing by Sino Iron and Korean Steel in respect of Royalty Component B as at 30 September 2015. That is, as at 30 September 2015, a total amount of $48 million was owed by way of Royalty Component B.

42 The relevant applications by Mineralogy were, in substance, for:

a mandatory interlocutory injunction compelling the CITIC parties to make immediate payment to Mineralogy of US$48 million, alleged to be due to Mineralogy in respect of unpaid Royalty Component B; and
an order that if Sino Iron and Korean Steel make that payment, they be permitted to operate the project provided they made ongoing quarterly payments to Mineralogy in respect of Royalty Component B at a rate nominated by it of US$6/dry metric tonne of concentrate shipped.

43 Despite the voluminous affidavit evidence that it filed, Mineralogy sought to have heard the applications heard on an urgent basis, insisting that for commercial reasons the applications had to be determined before 3 December 2015. That date was subsequently said to be 7 December 2015. The existing commitments of the case manager, Chaney J, precluded his Honour from hearing the applications within that time and they were therefore referred to the primary judge, who heard them on 7 December 2015 and dismissed them that day: Mineralogy Pty Ltd v Sino Iron Pty Ltd [No 8] [2015] WASC 473.

44 Before turning to the primary judge's reasons for decision, it is appropriate to mention that this is not the first time this issue has come before the court. Mineralogy has sought similar orders on two previous occasions, in each case the relief having been refused.

45 The first occasion was the subject of a decision of Edelman J of 10 October 2013: Mineralogy Pty Ltd v Sino Iron Pty Ltd [No 2] [2013] WASC 375. That concerned an injunction sought by Sino Iron and Korean Steel to restrain Mineralogy from issuing or purporting to issue any notice requiring Sino Iron and Korean Steel to suspend their operations under the MRSLAs, or from terminating either MRSLA, in reliance upon a default notice issued by Mineralogy on 26 July 2013. The default notice alleged that Sino Iron and Korean Steel were in breach of the MRSLAs by reason of their failure to pay the sum of $287,000 said to be owing by way of Royalty Component B.

46 On the hearing of the application, it appears to have been conceded by Mineralogy that Sino Iron and Korean Steel had a prima facie case that the default notice was invalid, but it submitted that when assessed in light of the balance of convenience the case was too weak to justify the grant of an injunction. Edelman J rejected that submission. His Honour concluded that there was sufficient strength to Sino Iron and Korean Steel's case to justify the injunction sought [25]. His Honour considered it was arguable that the calculation of Royalty Component B referred only to the discontinued Annual Benchmark Pricing System, and not to other pricing systems advanced by Mineralogy, with the result that Royalty Component B was not capable of calculation. His Honour also concluded that Mineralogy's argument that severance of Royalty Component B was a hopeless proposition was not to the point. That was because if it could not be severed, but Sino Iron and Korean Steel were correct that there was no means of calculating Royalty Component B, that would lead either to Sino Iron and Korean Steel's alternative argument that the parties had to negotiate in good faith to agree an appropriate replacement formula or to what was described by those parties as the 'Armageddon' that the MRSLAs would be unenforceable.

47 Mineralogy also submitted that as the price of the injunction Sino Iron and Korean Steel should pay the sum of $287,000 under protest. It argued that the effect of the position of Sino Iron and Korean Steel was that until (and assuming) Mineralogy's claim was made out at trial they were not liable to, and would not, pay any amount in relation to Royalty Component B, an amount that by the time of trial could be in the order of hundreds of millions of dollars.

48 His Honour did not accept that submission. He found that on the evidence it could not be concluded that Sino Iron and Korean Steel intended to, or would, refuse to pay any amount corresponding to Royalty Component B on any terms [62]. Edelman J gave four reasons for that conclusion. First, the application related only to the default notice concerning the alleged $287,000 debt. If a default notice were to be issued for hundreds of millions of dollars and Sino Iron and Korean Steel refused to pay any amount on any terms, the balance of convenience might be different [63]. Secondly, Sino Iron and Korean Steel had paid $1.8 million by way of Royalty Component A and had said they would pay any amount by way of Royalty Component B for which the court finds they are liable [64]. Thirdly, Sino Iron and Korean Steel's case was not simply that Royalty Component B is unenforceable. On their alternative case of an obligation to negotiate in good faith, there may arise an obligation on them to pay some amount by way of Royalty Component B [65]. Fourthly, it is to be expected that the parties will co-operate to ensure the action proceeds rapidly to trial at which a final determination as to the liability of Sino Iron and Korean Steel will be made [66]. His Honour observed that the proposed payment would effectively give Mineralogy a central part of the relief it seeks in the proceedings. He was not satisfied that in the circumstances of the application such a condition would be appropriate [69].

49 The other occasion was the subject of a decision of Chaney J of 5 March 2015: Mineralogy Pty Ltd v Sino Iron Pty Ltd [No 6] [2015] WASC 80. That involved an application by Sino Iron and Korean Steel, in substance, of a similar nature to the application before Edelman J. On this occasion, it was to restrain Mineralogy from acting on various notices it had issued in July 2014 and September 2014. The first notice, a default notice dated 10 July 2014, alleged a refusal by Sino Iron and Korean Steel to request the nomination of an expert to deal with a dispute as to the calculation of Royalty Component B for the quarter ended March 2014, contrary to cl 33.2(b) of the MRSLAs. A second default notice, dated 18 July 2014, alleged a failure by Sino Iron and Korean Steel to provide a statement as to the calculation of Royalty Component B for the June quarter 2014, contrary to cl 8.4 of the MRSLAs. Sino Iron and Korean Steel submitted that if their contention that Royalty Component B was incapable of calculation were correct then there could be no such breaches of the MRSLAs. The September notices did not concern the royalty issue.

50 Chaney J concluded there was a serious question to be tried in relation to the validity of the notices in respect of which the injunctions were sought [41]. His Honour considered that while no basis had been made out for restraining Mineralogy from issuing further default notices or taking certain other steps short of forcing Sino Iron and Korean Steel to suspend or cease operating the project, it was an appropriate case for an injunction which would prevent Mineralogy taking steps to prevent Sino Iron and Korean Steel carrying on the project pending the resolution of the action [50].

51 Mineralogy submitted that the injunction should be subject to a condition requiring Sino Iron and Korean Steel to pay the sum of $22 million by way of Royalty Component B for the period up to the quarter ending 31 December 2014 and thereafter in respect of Royalty Component B to pay quarterly an amount of US$11.65 per dry metric tonne of Products (as defined in the MRSLAs) produced. Those amounts were based on a report prepared by a chartered accountant, Mr Steven Sorbello, and had been derived from calculations made by Mr Sorbello.

52 Chaney J rejected that submission. His Honour observed that there was no explanation of the origin of the figure of $22 million. He considered there was no reliable basis for Mr Sorbello's calculations and upheld the objection of Sino Iron and Korean Steel to that evidence [58]. His Honour concluded that there was no basis upon which any figure could reliably be adopted to support the condition sought by Mineralogy [59]. His Honour also noted that Mineralogy made no claim in the action for the payment of any amount by way of Royalty Component B, apparently because Sino Iron and Korean Steel had said that if it was capable of calculation they would pay it. Mineralogy simply sought the imposition of interim payments as the price of the injunction. His Honour noted that the current position was that Minerology was not receiving any payment by way of Royalty Component B and the action was proceeding to determination on the basis that it would not receive any interim payment. Mineralogy had indicated that it did not intend to take the drastic step of stopping the operation of the project. An injunction would therefore be designed simply to formalise that position. In those circumstances, his Honour found the condition should not be imposed, especially given the impossibility of reliably determining an amount on the evidence [60].

53 Against that background, I turn then to the reasons for decision of the primary judge.

54 The primary judge noted at the outset that there was still no statement of claim in final form. The version before the primary judge was the third further amended statement of claim. His Honour, having observed that this version did not include any money claim in respect of outstanding royalties, summarised the claims made in it as:

(1) that Sino Iron and Korean Steel have failed to allow Mineralogy to inspect various books and records to enable it to verify the amount of ore mined and its royalty entitlements in breach of various clauses of the MRSLAs;

(2) that Sino Iron and Korean Steel have failed to provide Mineralogy with geological and technical information in breach of various clauses of the MRSLAs;

(3) that Sino Iron and Korean Steel have failed to join in the appointment of an expert to determine the dispute about the cl 8 royalty in accordance with the provisions of the MRSLAs.

In respect of the first two claims, Mineralogy seeks orders for the production of relevant documents and the relevant information.

In relation to the claim concerning the failure to join in the appointment of an expert to determine the cl 8 royalty dispute, Mineralogy seeks various declarations and an order for specific performance designed to compel compliance by Sino Iron and Korean Steel with the contractual provisions.

In addition, Mineralogy seeks 'nominal damages for breach of contract'.

55 (I digress to mention that, on 23 March 2016, Mineralogy was granted leave to further amend its statement of claim in a number of respects, including to plead, in the alternative, claims of unjust enrichment and for rectification of cl 8 of the MRSLAs.)

56 The primary judge then summarised the relevant legal principles relating to interlocutory injunctions and set out a short summary of Mineralogy's contentions on the application. It was as follows:

(a) that up to 30 September 2014 Sino Iron and Korean Steel were obliged to pay, and have not paid, to Mineralogy Royalty Component B on a quarterly basis, the total of which is approximately $22M;

(b) Sino Iron and Korean Steel have repudiated the MRSLAs on a number of bases and notices of termination given by Mineralogy in September 2014 were effective to terminate the MRSLAs in October 2014;

(c) alternatively Mineralogy effectively terminated the MRSLAs by the delivery of the claim and statement of claim [in other proceedings];

(d) Sino Iron and Korean Steel have continued to mine and export iron ore concentrate since September 2014 and are liable in damages to Mineralogy for the value of the concentrate which has been exported since that date, a sum of approximately $190M;

(e) further, Mineralogy is entitled to loss of bargain damages for the repudiation of the MRSLAs by Sino Iron and Korean Steel in the amount of $6.4B;

(f) alternatively, if Mineralogy has not validly terminated the MRSLAs, then Sino Iron and Korean Steel ought to have paid to Mineralogy further sums for Royalty Component B for each quarter since 30 September 2014 up to and including 30 September 2015, the total amount of which is approximately $26M.

57 The primary judge noted that the respondents conceded there was a serious question to be tried as to their liability to make royalty payments under the MRSLAs, but did not make that concession as to quantum [61]. (In fact, it appears that the concession extended to both liability and quantum (ts 837, 879) [GAB 1, 34, 76]). The respondents submitted, however, that given the complexity of the issue it was not appropriate to make any assessment of the strength of Mineralogy's case on an urgent application, especially as the respondents had not had an opportunity to file expert evidence in response to Mineralogy's expert evidence.

58 His Honour also noted that Mineralogy placed a great deal of emphasis on its claims that it had terminated the MRSLAs by reason of Sino Iron and Korean Steel's repudiatory breach and that it claimed to be entitled to very substantial damages, in addition to approximately $22 million in respect of unpaid Royalty Component B to the date of the alleged termination in October 2014 [63].

59 The primary judge concluded that the strength of any claim for damages was irrelevant as there was no basis upon which a plaintiff could obtain an injunction compelling the payment of damages prior to trial. He considered that Mineralogy could only obtain the injunctions it sought on the basis of an order compelling the performance of a contractual obligation; that is, the claims for Royalty Component B payments being claims for a debt [66], [67]. His Honour did not therefore attempt to make any assessment of Mineralogy's claim that it had validly terminated the MRSLAs or of its claim for damages [65].

60 The primary judge then turned to the issue of the quantum of Mineralogy's claim. Mineralogy relied upon two expert witnesses, Mr Brierley, and Mr Sorbello, each of whom had prepared a report that was attached to their respective affidavits. Mr Brierley's report gave various opinions as to the published Brazilian price and the published Mount Newman price at various dates. Mr Sorbello's report contained calculations as to the quantum of Royalty Component B based on assumptions which incorporated Mr Brierley's opinions. Mr Sorbello concluded, based on that material, that the amount payable by way of Royalty Component B as at October 2014 was US$21,424,686 and since that time was US$26,658,261.

61 The primary judge found that the detailed and technical nature of that evidence meant that it was impossible to evaluate it and, in addition, that it would be unfair to the respondents to draw any conclusions based on it without those parties having had an opportunity to adduce their own expert evidence [71]. His Honour concluded that while he was satisfied that Mineralogy had established a serious question to be tried in respect of its entitlement to payments in respect of Royalty Component B, he was not in a position to make any assessment of the strength of Mineralogy's claims, and especially any provisional assessment of quantum [74].

62 On the balance of convenience, Mineralogy submitted that damages would not be an adequate remedy because of the harm that it and related entities and sections of the general public, both within Australia and overseas, would suffer if the injunctions were not granted. It identified the affected third parties as Queensland Nickel Pty Ltd (QN), which it said required an injection of funds by Mineralogy to prevent QN's nickel refinery closing; the state of New Caledonia which as a vendor of laterite ore to the refinery would be adversely affected if the refinery closed; two subsidiaries of Mineralogy which it said were reliant on Mineralogy for funds; and the Palmer Care Foundation which it also said was reliant on Mineralogy for funds. Mineralogy further submitted that it was unjust that Sino Iron and Korean Steel should have the benefit of the project without paying Royalty Component B.

63 Mineralogy conceded that the application was, in effect, an attempt to re-argue the point it had advanced before Chaney J, but contended that it now had admissible evidence of the quantum of its claim and there was a demonstrable need for urgent relief.

64 The primary judge accepted that as matters stood there was an inherent risk that the respondents were enjoying the benefits of the project without paying the consideration they had agreed to pay. His Honour considered, however, that that was only one of the factors to be considered in the exercise of his discretion [102]. He concluded that the injunction should be refused for four reasons. They were as follows.

65 First, the court could not order that a payment be made in respect of damages before trial, so the injunction could not be sustained on the basis that Mineralogy was likely to receive an award of damages at trial [103]. Second, in seeking payment in respect of Royalty Component B, Mineralogy was asking the court, in effect, to determine in its favour the issue of the liability of Sino Iron and Korean Steel to pay the royalty and the quantum of it [104]. Those were the central issues in extended and complex litigation, and the expert evidence now adduced by Mineralogy on quantum had not been tested because of the urgency with which it had caused the application to be brought on. Those difficulties, and particularly the difficulty of making a provisional assessment of quantum, militated against an interlocutory order for payment [105]. Third, the difficulties in making a determination on a summary basis of what the respondents must do in relation to Royalty Component B to 'do equity' constituted a serious practical obstacle to the invocation by Mineralogy of the principle that a party seeking equity must do equity [106]. His Honour observed that the second and third reasons weighed most heavily in the exercise of his discretion and militated against the grant of an injunction [107]. Fourth, his Honour accepted that Mineralogy and its related entities may suffer prejudice for which any monetary amount awarded at trial may not be adequate compensation. He also accepted that it was not a complete answer to the application that Mineralogy's claim in the action was simply for a money sum. However, his Honour concluded that the potential harm to Mineralogy did not tip the balance of injustice in its favour [108]. In that connection, his Honour then reviewed the categories of harm alleged by Mineralogy.

66 The primary judge expressed reservations about the evidence as to Mineralogy's inability to fund its activities [114]. His Honour noted that its draft financial statements appeared to show that, as at 30 June 2015, it had net assets of $86,626,850, of which total exploration and mining rights comprised $77,992,353. There was affidavit evidence that 'the big four banks' had told representatives of Mineralogy that they did not regard mineral deposits as adequate security for borrowings and that the National Australia Bank had said it would not lend money to Mineralogy or QN. His Honour considered that Mineralogy had overstated the position in contending that without an injection of cash it would be unable to fund its litigation with the respondents or the expenditure commitments of its resources subsidiaries. His Honour noted that there was no evidence as to the possibility of Mineralogy raising funds or financing its obligations by alternative means, or as to other possibilities for funding the litigation [112].

67 His Honour did not consider that any inability to fund the Palmer Care Foundation carried significant weight [115].

68 In respect of the effect on QN and the New Caledonian interests, the primary judge noted that the effect of the evidence adduced by Mineralogy was that QN had a need for $28 million by the day of the hearing to meet its commitments, in the absence of which QN would be put into administration and the employment of 767 employees would be terminated [116], [117]. The primary judge was not prepared to accept that QN faced such dire consequences. His Honour noted that QN's annual report for the financial year ended 30 June 2015 recorded that it had traded successfully over several decades and he observed that it had been sufficiently profitable in the 2013 - 2014 financial year to donate $15 million to the Palmer United Party [119]. Its financial statements for the financial year ended 30 June 2015 recorded that its total current assets exceeded its total current liabilities by some $1.95 billion and its financial controller, Mr Wolfe, had deposed that its non-current assets were $1.95 billion and it had no debt other than a $23 million facility relating to equipment. The annual report also recorded that QN had invested $900 million expanding the production capacity of the refinery and that that expansion, which was continuing, would make it the fifth largest nickel refinery in the world.

69 The primary judge observed that there was no evidence of any attempts to obtain finance other than from the major retail banks, or to rationalise QN's activities and there appeared to have been no meetings with financiers since 2 October 2015. There was no evidence of any attempt to find a way for QN to resolve its financial difficulties otherwise than by the injunction application or by closing the refinery and terminating the workforce [123] - [124]. His Honour evinced obvious scepticism at the extreme consequences foreshadowed if the application failed, given QN's long trading history, strong balance sheet, and important position in the Queensland economy and society [124].

70 His Honour accepted there was a risk that QN might be placed into administration, but did not accept that the drastic consequences foreshadowed by Mineralogy would occur if that came about. The New Caledonian interests were therefore not at risk to the extent contended by Mineralogy [126].

71 The application for an injunction was dismissed.

72 The grounds of appeal are very lengthy and it is unnecessary to set them out in full. They are, in substance, that the primary judge erred in law:

(1) in that having found there was a serious question to be tried in respect of Mineralogy's claim to Royalty Component B, reasoned that he was not in a position to make 'any' assessment of the strength of the Mineralogy's case;

(2) in holding that there was no basis in principle upon which a court can order that a payment be made to a plaintiff in respect of a claim for damages before the claim is determined, that reasoning being wrong and irrelevant because the appellant was not relying on a claim for damages but was seeking to compel performance of a contractual obligation;

(3) in refusing relief because of his reasoning that (a) Mineralogy was asking the court to determine on a provisional basis Mineralogy's entitlement to Royalty Component B and its quantum, when (i) the only question to be determined on a provisional basis was whether there was a serious question to be tried on those issues, a matter conceded by the respondents; (ii) it is inherent in an interlocutory injunction that issues in the action will have to be determined on a provisional basis; and (iii) any such determination would not affect the rights of the parties; and (b) the difficulty of making a provisional assessment of quantum militated against the application in circumstances where there was evidence enabling him to make that assessment, which he did not examine, and where the exercise of the jurisdiction enabled a flexible approach to be taken to that issue;

(4) in that, having found that there was an inherent risk that the respondents were enjoying the benefits of the project without paying the consideration they had agreed to pay, he failed to apply the principle that a party who seeks to enforce an ongoing contractual relationship on another party against that party's will must pay money due under the contract;

(5) in finding that the balancing of the risks of injustice did not favour the grant of injunctive relief, in circumstances where (i) he found there was a risk the appellant and related entities may suffer prejudice if the relief was not granted, and there was a risk that the respondents were enjoying the benefits of the project without paying the consideration they had agreed to pay; (ii) he had made no finding that the respondents would suffer any prejudice if the relief were granted; and (iii) he had erred in weighing as part of the balance of convenience the difficulties of making a provisional assessment of quantum; and

(6) in refusing to grant the relief, which was unreasonable and unjust in circumstances where (i) the relevant status quo was that the respondents were and would continue to mine and ship ore under the MRSLAs; (ii) a mandatory injunction may be granted to compel contractual performance; (iii) there was a risk that the respondents were enjoying the benefits of the project without paying the consideration they had agreed to pay; (iv) there was a serious question to be tried in respect of its entitlement to be paid Royalty Component B; (v) there was a risk Mineralogy and related entities may suffer prejudice if the relief was not granted for which an award of damages may not be adequate compensation; and, (vi) there was no finding that the respondents would suffer any prejudice if the relief were granted.

73 It is convenient to dispose first of ground 2, as that can be done very briefly.

74 This ground is entirely misconceived. Whilst the primary judge concluded (at [65]) that a court could not order that a payment be made to a plaintiff in respect of a claim for damages before the claim is determined, his Honour did not determine the application on that basis. His Honour expressly disregarded Mineralogy's claim for damages [65], [66]. Having found (at [66]) that Mineralogy could only obtain the injunctions it sought on the basis of an order compelling the performance of a contractual obligation - that is, on the basis of its claims for payment of Royalty Component B - the primary judge determined the application on that basis [17], [18], [67].

76 I did not understand it to be in issue that, notwithstanding some older authorities to the contrary, the test to be applied on an application for an interlocutory injunction is no different whether the application is for a mandatory injunction or a prohibitory injunction. I accept that to be the position.

77 The contrary view that a higher standard is to be applied in respect of a mandatory interlocutory injunction appears to have had its genesis in the decision of Megarry J in Shepherd Homes Ltd v Sandham [1971] 1 Ch 340, 351, where his Honour said:

In a normal case the court must, inter alia, feel a high degree of assurance that at the trial it will appear that the injunction was rightly granted; and this is a higher standard than is required for a prohibitory injunction.

78 That was applied in Australia by Gibbs CJ, sitting at first instance, in The State of Queensland v Australian Telecommunications Commission (1985) 59 ALR 243, 245, and has been applied in a number of cases since that time.

79 Shortly afterwards in England in Films Rover International Ltd v Cannon Film Sales Ltd [1987] 1 WLR 670, Hoffmann J took a somewhat different approach. His Honour said:

The principal dilemma about the grant of interlocutory injunctions, whether prohibitory or mandatory, is that there is by definition a risk that the court may make the 'wrong' decision, in the sense of granting an injunction to a party who fails to establish his right at the trial (or would fail if there was a trial) or alternatively, in failing to grant an injunction to a party who succeeds (or would succeed) at trial. A fundamental principle is therefore that the court should take whichever course appears to carry the lower risk of injustice if it should turn out to have been "wrong" in the sense I have described.

The passage quoted from Megarry J in Shepherd Homes Ltd v Sandham ..., qualified as it was by the words 'in a normal case', was plainly intended as a guideline rather than an independent principle. It is another way of saying that the features which justify describing an injunction as 'mandatory' will usually also have the consequence of creating a greater risk of injustice if it is granted rather than withheld at the interlocutory stage unless the court feels a 'high degree of assurance' that the plaintiff would be able to establish his right at a trial.

80 Hoffmann J went to say that 'semantic arguments over whether the injunction as formulated can properly be classified as mandatory or prohibitory are barren. The question of substance is whether the granting of the injunction would carry that higher risk of injustice which is normally associated with the grant of a mandatory injunction.'

81 The 'high degree of assurance' test was rejected by Gummow J in Businessworld Computers Pty Ltd v Australian Telecommunications Commission (1988) 82 ALR 499. His Honour instead adopted what had been said in Films Rover, observing that the 'reasoning of Hoffmann J is consistent with what is to be gleaned from consideration of the historical development of this remedy'. In that connection, his Honour said:

First, it has long been the case that interlocutory mandatory injunctions would be more likely to issue where the defendant was compelled, not to embark upon a fresh course of conduct, but, as here, to revert to a course of conduct pursued before the occurrence of the acts or omissions that provoked the litigation. Secondly, whilst there has been a natural reluctance to decree burdensome relief without a full hearing, prohibitory injunctions may have that tendency just as much as mandatory relief, and there has never been general acceptance of any precise verbal formula controlling the grant of interlocutory mandatory relief. (503)

82 In Racecourse Totalizators Pty Ltd v Totalisator Administration Board of Queensland [1995] FCA 1405; (1995) 58 FCR 119, 123, Kiefel J, while expressing difficulty with some observations made in Films Rover with which Gummow J had expressed agreement in Businessworld Computers, rejected the proposition that the classification of an order as 'mandatory' automatically attracted the requirement that the court have further confidence in the correctness of the order. Her Honour regarded the issue as one to be dealt with by considering the balance of convenience, having regard to the effect the order will have.

83 While the 'high degree of assurance' test has been applied in a number of cases, it has by no means enjoyed universal acceptance. It was firmly rejected by the Privy Council in National Commercial Bank Jamaica Ltd v Olint Corporation Ltd [2009] UKPC 16 [19] - [21], where their Lordships said in respect of prohibitive and mandatory injunctions:

In both cases, the underlying principle is the same, namely, that the court should take whichever course seems likely to cause the least irremediable prejudice to one party or the other... What is true is that the features which ordinarily justify describing an injunction as mandatory are often more likely to cause irremediable prejudice than in cases in which a defendant is merely prevented from taking or continuing with some course of action ... But this is no more than a generalisation. What is required in each case is to examine what on the particular facts of the case the consequences of granting or withholding of the injunction is likely to be. If it appears that the injunction is likely to cause irremediable prejudice to the defendant, a court may be reluctant to grant it unless satisfied that the chances that it will turn out to have been wrongly granted are low; that is to say, that the court will feel, as Megarry J said in Shepherd Homes Ltd v Sandham [1971] Ch 340, 351, 'a high degree of assurance that at the trial it will appear that the injunction was rightly granted'.

For these reasons, arguments over whether the injunction should be classified as prohibitive or mandatory are barren .... What matters is what the practical consequences of the actual injunction are likely to be. [citations omitted]

84 In Australia, a similar approach has been taken by the Court of Appeal of Victoria in Optus Networks Pty Ltd v Stonnington City Council [1996] VICSC 12; [1996] 2 VR 209, 213, Optus Networks Pty Ltd v City of Boroondara [ 1997] 2 VR 318, 335 and Bradto Pty Ltd v The State of Victoria [2006] VSCA 89 [35]; by the Court of Appeal of Queensland in Bingham v 7-Eleven Stores Pty Ltd [2003] QCA 402 [108]; and in numerous decisions at first instance in various courts, including those referred to previously and this court in JTA Le Roux Pty Ltd (as trustee for the FLR Family Trust) v Lawson (No 2) [2013] WASC 373 (in which many of the authorities are collected; see also, in that respect, Ocean Dynamics Charter Pty Ltd v Hamilton Island Enterprises Ltd [2015] FCA 460).

85 In my view, both principle and the weight of recent authority lead to the conclusion that no different standard applies in respect of an application for a mandatory injunction, although, as the authors of Meagher, Gummow & Lehane's Equity Doctrines and Remedies (5th ed, LexisNexis Butterworths, 2015), point out:

... in the application of the normal tests, often, though not always, the fact that the relief sought is mandatory will tilt the balance of convenience in the defendant's favour [21 - 395].

86 No doubt that is at least one of the reasons that mandatory interlocutory injunctions are rare.

87 The principles to be applied on an application for an interlocutory injunction are well-known and were not in dispute. The two main enquiries that arise are whether the plaintiff has made out a prima facie case and whether the balance of convenience favours the grant of the injunction. The first inquiry as to a 'prima facie case' does not mean that the plaintiff must show that it is more probable than not that at trial the plaintiff will succeed. It is sufficient that the plaintiff show a sufficient likelihood of success to justify, in the circumstances, the preservation of the status quo pending the trial. How strong the probability needs to be depends upon the nature of the rights the plaintiff asserts and the practical consequences likely to flow from the orders the plaintiff seeks. The second inquiry is whether the inconvenience or injury which the plaintiff would be likely to suffer if an injunction were refused outweighs, or is outweighed by, the injury which the defendant would suffer if an injunction was granted: Beecham Group Ltd v Bristol Laboratories Pty Ltd [1968] HCA 1; (1968) 118 CLR 618; Australian Broadcasting Corporation v O'Neill [2006] HCA 46; (2006) 227 CLR 57. Whether an applicant for an interlocutory injunction has made out a sufficient prima facie case and whether the balance of convenience favours the grant of such relief are related, not independent, questions: Warner-Lambert Co LCC v Apotex Pty Ltd [2014] FCAFC 59 [70].

88 Against that background, I turn to the issues which arise on this ground of appeal.

89 It will be recalled that the primary judge found that Minerology had established a serious question to be tried in respect of its entitlement to payments in respect of Royalty Component B - indeed, that had been conceded by the respondents - but had then concluded that he was not in a position to make any assessment of the strength of Mineralogy's claims [74]. He accordingly made no such assessment. In declining to do so, his Honour felt constrained by two factors: the detailed and technical nature of the expert evidence, and his view that it would be unfair to the respondents to do so in circumstances where they had not had an opportunity to adduce expert evidence in response [71].

90 Mineralogy contended that it was not open to his Honour to take that course. It submitted that it is the nature of interlocutory injunctions that they are sought, and granted, on short notice and less than complete information. The proper determination of the application required that the primary judge make an evaluation of the strength of the case advanced by Mineralogy so that that could be weighed with the other factors relevant to the exercise of his Honour's discretion. Inadequacies in the information before his Honour did not remove the obligation to undertake that task. His Honour simply had to do the best he could with what he had. Having not evaluated the strength of Mineralogy's case, his Honour could not properly weigh the balance of convenience, as he attempted to do.

91 It was submitted by Mineralogy that, moreover, the primary judge did not in fact face great difficulty in making a proper provisional evaluation of the strength of its case. That could be done by applying the ordinary principles of construction to the terms of the MRSLAs. Had he done so, he would have concluded that Mineralogy had a very strong prima facie case that it was entitled to be paid Royalty Component B. It was commercially absurd to suggest, as the respondents effectively did, that the parties intended that if the Annual Benchmark Pricing System was discontinued, or for so long as it ceased to be operative, the respondents should have the benefit of the project without paying the majority of the consideration they had agreed to pay for it.

92 Mineralogy argued that no question of uncertainty arose and in any event there could be no serious argument for severance. The severance of Royalty Component B would fundamentally alter the commercial bargain between the parties. Not only was Royalty Component B by far the largest part of the consideration payable under the MRSLAs but the surrender of it was the exercise price of an option Mineralogy had under the MRSLAs to acquire up to just under 20% of Sino Iron and Korean Steel.

93 It was submitted that there was no basis for refusing an injunction in circumstances where (1) the primary judge had found that (a) there was an inherent risk that the respondents were enjoying the benefit of the project without paying the consideration they had agreed and (b) there was a risk Mineralogy and its related entities may suffer prejudice if no order for payment was made and an award after trial may not be adequate compensation; and (2) there was no finding that the respondents would suffer any irremediable damage if an injunction were granted.

94 The respondents contended, in effect, that Mineralogy was in no position to complain about its failure on the application, having no statement of claim in a final form and having brought on the application, supported by lengthy, detailed and technical evidence, with such (unnecessary) urgency that it was impossible for the respondents to respond to that evidence or the primary judge to evaluate it. It was also submitted that the application was simply an attempt to circumvent or reargue the earlier decisions of Edelman J and Chaney J refusing such relief.

95 On the substantive issues on the appeal, the respondents argued that on an application for an interlocutory injunction the extent to which a court is required to embark upon a detailed consideration of the strength of the applicant's case depends upon the circumstances of the case. The urgency of the matter may make it impracticable to give proper consideration to questions of law on which the case turns. It was submitted that once satisfied that an applicant has a prima facie case, a court is not obliged to evaluate the strength of the applicant's case for final relief if it is not practicable to do so, such as in the circumstances of the alleged urgency of this case. There was therefore no error by the primary judge in concluding that he was not in a position to make an assessment of the strength of Mineralogy's case, including any provisional assessment of quantum.

96 In the alternative, the respondents argued that if the primary judge had erred as alleged that was not relevant to the outcome. His Honour was not in error in not applying the ordinary principles of construction to the terms of the MRSLAs in order to make a provisional evaluation of the strength of Mineralogy's case. The question whether cl 8.2 refers to the (now discontinued) Annual Benchmark Pricing System is a question that has to be left to be determined at trial on the basis of the evidence adduced. And the argument that it does, and that Royalty Component B is therefore not capable of calculation, clearly raises an issue of uncertainty.

97 The respondents also rejected the contention that severance was out of the question. That, it was submitted, was a question that turned on the intention of the parties. Support for the respondent's position was to be found in cl 38.5 of the MRSLAs which made specific provision for the severance of any part of the MRSLAs that was found to be void or unenforceable. Moreover, the test of severability is flexible and permits severance where it would change the extent but not the kind of contract. In this case, severance would change the extent of the consideration payable but not the kind or nature of the agreement.

98 It was further argued that if the primary judge was required to assess the strength of Mineralogy's case, that would also have involved assessing the strength of the respondent's arguments that it was an implied term of the MRSLAs that the amount to be paid by way of Royalty Component B is a fair and reasonable amount, and alternatively, that the MRSLAs had been frustrated. On the first point, Mr Brierley's report expresses opinions as to prevailing prices, not as to a fair and reasonable royalty, and in any event it was not possible to evaluate that evidence because of the way the application was brought on. On the second point, if the MRSLAs had been frustrated no amount would be payable.

99 Finally, it was submitted that the strength of Mineralogy's case was only one factor to be weighed in the balance and the injunction would not have been granted by reason of other matters, including those raised in the notice of contention.

100 The primary judge was plainly placed in a difficult position by the urgency with which Mineralogy insisted the application had to be dealt with and by the circumstances in which it came on for hearing. While there was still no statement of claim that appeared to state Mineralogy's final case, the action over its long and convoluted history had generated voluminous documentation. Extensive and complex affidavit evidence, to which the respondents had not had an opportunity to respond, was put at short notice before his Honour in support of the application. And Mineralogy maintained that because of the commercial exigencies of its associated entities, his Honour should give an immediate decision.

101 However, notwithstanding those difficulties, there is, I think, force in Mineralogy's submission that in determining the application it remained incumbent upon his Honour to make an assessment of the strength of Mineralogy's case and that his Honour simply had to do the best he could in the circumstances in which he found himself.

102 It is clear that on an application for an interlocutory injunction the court does not 'undertake a preliminary trial, and give or withhold interlocutory relief upon a forecast as to the ultimate result of the case': Beecham, 622. But it is necessary for an assessment to be made of the strength of the plaintiff's probability of ultimate success. It is plain from the test described in Beecham and O'Neill that the plaintiff's probability of success at trial is a critical factor in the determination of such an application. In that respect, as the Full Court of the Federal Court observed in Samsung Electronics Co Ltd v Apple Inc [2011] FCAFC 156; (2011) 217 FCR 238 [59], it is not enough simply to conclude that the plaintiff has a 'prima facie' case. What is required is an assessment or evaluation of the case for the purpose of deciding whether the plaintiff has made out a prima facie case of sufficient strength to justify the grant of an interlocutory injunction and to enable the strength of the case to be taken into account in an assessment of the balance of convenience and justice: Samsung [87] - [88].

103 Whilst there were undoubtedly difficulties in making that assessment in the present case, there was material before the primary judge upon which such an assessment could be made. The extent and complexity of the material on which Mineralogy relied, the extreme urgency pressed on him by Mineralogy and the fact that the respondents had not had an opportunity to respond to the expert evidence, were matters that his Honour was entitled to take into account in making that assessment but, in my opinion, it did not relieve him of the task of assessing the strength of Mineralogy's case as best he could.

104 As a consequence of declining to undertake that evaluative task, the primary judge was not in a position to determine whether Mineralogy had shown a sufficient likelihood of success to justify, in the circumstances, the grant of the injunction pending the trial. In my respectful view, by declining to undertake it, his Honour fell into error.

105 I would uphold this ground of appeal. In those circumstances it is unnecessary to determine the remaining grounds upon which Mineralogy relies and indeed they involve issues that could not properly be resolved until there is an assessment of the strength of Mineralogy's case in the action.

106 The question that then arises is whether, as the respondents contend, the application should in any event have been dismissed on grounds not relied upon by the primary judge.

107 Before dealing with the specific issues raised by the notice of contention, I should mention the respondents' submission that the application to the primary judge was an attempt to circumvent the refusal by each of Edelman J and Chaney J, as described above, to order the payment of Royalty Component B as the price of the injunctions granted to the respondents. The primary judge described the application in similar terms [100].

108 I did not understand the respondents to argue, or at least to argue with any conviction, that the fact that similar relief had been refused on those occasions was a reason that the primary judge was entitled to refuse relief in this case or a reason that this court should decline to interfere with his Honour's decision. For the sake of completeness, however, I should say that if the respondents did intend to advance such a contention, I do not accept it. The application to the primary judge was made in quite different circumstances and on different evidence and, indeed, in his reasons for decision Edelman J had expressly left open ([at 63]) the prospect that different issues as to the balance of convenience might arise on an application for interim payment of Royalty Component B if the amount alleged to be involved was much more substantial than it then was. Having regard to the circumstances of the previous occasions on which the matter was raised by Mineralogy, the refusal of such relief on those occasions is not a matter of significance on the appeal.

109 Turning then to the notice of contention, four issues were raised by the respondents. They were in substance, as follows:

(1) Mineralogy was unable to offer a meaningful undertaking as to damages;

(2) the evidence revealed a real risk that if the injunction was wrongly granted, the respondents would suffer irreparable harm as Minerology would have insufficient funds to repay the sums wrongly awarded to it;

(3) where an injunction would defeat the commercial risk allocation made by the parties in their contract, it bears squarely on the risk of injustice from an erroneous grant of relief that must be weighed in the balance of convenience. Here the parties chose not to allocate the risk of non-payment pending dispute resolution, and therefore granting the injunction would disturb the balance of the parties' bargain;

(4) on the basis of fresh evidence that the respondents sought leave to adduce, it was submitted that there had been a lack of candour by Mineralogy as to the alleged urgency of the application, in that it knew by the end of November 2015 that the last date by which it had to provide funds to QN was 28 December 2015, not 7 December 2015.

110 The first two grounds can be considered together. They are based upon the respondents' submission that, on the evidence, Mineralogy's financial position was precarious and that accordingly security should be required for any undertaking as to damages. The security offered by Mineralogy was, in effect, a set-off against future amounts owing to Mineralogy by way of royalties, the basis, amount and timing of which, it was submitted, were impossible to predict. It was also submitted, first, that if, as appears from evidence adduced by Minerology, it is unable to borrow against the mineral deposits then they are inadequate security for an undertaking; and, secondly, that on the evidence there is not sufficient ore in the proffered security to cover the potential damages. The respondents added that despite request, Mineralogy's shareholder, Mr Palmer, had refused to provide security for an undertaking.

111 Mineralogy denied that the security was inadequate, contending that the amounts sought by the injunction would, in the event it was found Royalty Component B was not payable, be more than covered by the continuing liability of the respondents for Royalty Component A and by options held by Sino Iron and Korean Steel to acquire rights to mine additional ore. It also submitted, first, that even if it were found that it was unable to provide a meaningful undertaking as to damages, that was not decisive as it would remain fundamentally unjust for one party to a contract to enjoy the benefits of the contract without paying a substantial part of the consideration, even if the other party was impecunious. Secondly, the alleged inadequacy had to be viewed in light of the likely damages. Mineralogy submitted that the respondent's case that nothing was payable by way of Royalty Component B was at best tenuous, in circumstances where that royalty made up about 95% of the consideration payable under the contract. On all the other arguments advanced by the respondents, a reasonable sum was payable in place of Royalty Component B and Mr Brierley's affidavit provided evidence as to what a reasonable sum was.

112 In the circumstances, I do not consider that the question of Mineralogy's capacity to provide an adequate undertaking as to damages, or the significance of the extent of any incapacity to do so, are matters that can be resolved in isolation from the other issues that arise for determination on the application for the injunction, including the probability of Mineralogy's ultimate success at trial. They are matters properly left for consideration on a rehearing of the application, on the material that is then before the court.

113 That is also the position in relation to the third ground in the notice of contention. The fourth ground goes no further than a contention that Mineralogy had overstated the urgency of the application to the primary judge and it could not now be heard to complain that his Honour declined to attempt to evaluate the material before him because the respondents had not had an opportunity to answer it. That ground falls away in light of my conclusion that his Honour was in error in not evaluating the strength of Mineralogy's case. The additional evidence the respondents sought to adduce in support of that ground cannot advance their case and leave to rely on it should be refused.

114 It appears from recent events that the urgency that was originally said to attend the determination of the application for a mandatory injunction - the need for QN to be placed in funds by Mineralogy to maintain the operation of QN's refinery - no longer exists. It is not apparent that there is a need for the application to be determined with particular urgency. There was no finding by the primary judge that Mineralogy and the associated entities to which it referred are in urgent need of the funds sought by the injunction and the (unchallenged) findings by his Honour as to their financial situation are inconsistent with any such need.

115 In the circumstances, it is neither necessary nor appropriate that this court attempt to determine the application. The appropriate course is to remit the matter for rehearing before a different judge so that the respondents can have an opportunity to respond to Mineralogy's expert evidence and the matter can then to be fully argued. It is appropriate that it be reheard by Chaney J, who is managing the action in the CMC list.

(d) refuse the respondents' application to adduce additional evidence on the appeal.

117 CORBOY J: I agree with the orders proposed for the reasons published by McLure P and Newnes JA.

MINERALOGY PTY LTD -v- SINO IRON PTY LTD [2016] WASCA 105 (27 June 2016)

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MINERALOGY PTY LTD -v- SINO IRON PTY LTD [2016] WASCA 105 (27 June 2016)

Cases Cited (6)